This clinical study is being conducted at multiple sites to determine the activity, safety and tolerability of XL784 when given daily to patients with albuminuria due to diabetic nephropathy. XL784 is a small molecule reno-protective metalloproteinase inhibitor, inhibiting both ADAMs (including ADAM10, a target of significant interest because of its important role in blood vessel formation and cell proliferation, and ADAM17/TACE, activation of which has been associated with renal deterioration) and MMPs (including MMP-2 and MMP-9). XL784 was specifically optimized to be MMP-1 sparing, which may be clinically significant because inhibition of MMP-1 has been hypothesized to be associated with musculoskeletal toxicity.